Economic Stimulus Package Could Bring Big Benefits For Real Estate Sector

Reposted with permission. 

Joe Brown, the President of Coldwell Banker Residential Brokerage's Silicon Valley, Monterey Bay and East Bay regions writes this report every week about the real estate market here in Northern California.  I thought you all might enjoy it so I have decided to repost it weekely here on my blog.

Mark

Friday, February 6, 2009

Economic Stimulus Package Could Bring Big Benefits For Real Estate Sector

If you tuned into CNN, Fox News or any of the other major news media outlets this week, you likely watched the drama unfold regarding the new Economic Stimulus Package which is currently making its way through the Senate. This controversial package has many speculating as to its legitimacy but is being driven by President Obama in an effort to jump-start our ailing economy.

To learn more about the status of the Economic Stimulus Package, click here: http://www.reuters.com/article/politicsNews/idUSTRE5136U320090204?virtualBrandChannel=10112

As of now, the Economic Stimulus bill is winding its way through the U.S. government, pushed by Demographic leaders who want to present President Obama with legislation he can sign by-mid February.

From a real estate perspective one of the biggest potential benefits of this Economic Stimulus Plan is special Amendment #353 to the Plan, a provision for the Federal Government to buy-down mortgage rates to 4.5% or less for a 30-year fixed rate loan for the purchase of a primary resident. Without question, a 4.5% or lower, 30-year fixed rate mortgage would help stimulate housing sales and would also open the door to hundreds of thousands of new potential buyers by greatly improving housing affordability.

While the Economic Stimulus Package makes its way through Washington, real estate sales continue to show new signs of life. Just this week, NAR released its pending home sales report noting that pending home sales rose 6.3 percent nationally to 87.7 from an upwardly revised reading of 82.5 in November and is 2.1 percent higher than December 2007 when it was 85.9.

Also noteworthy this week was an article I came across on Reuters.com (http://www.reuters.com/article/newsOne/idUSTRE5140H420090205) which points out that housing markets across the country may be nearing bottom and we should begin to see signs of new life by the 4th quarter of this year. Among the highlights of the article:

• "More than three years since the market began correcting, inventories are flattening, prices are coming back down to earth, and sales are approaching stability," the report said.
• "The outlook, however, assumes stronger action by U.S. policymakers and says that even with further government intervention, the recession will keep the housing market from fully recovering until the end of this year."
• "With this help, sales are probably at bottom, stabilized by foreclosure sales, while construction will hit bottom in the first half of this year, although the pace of housing starts will remain very depressed until 2011."

The coming week will likely be an interesting one in Washington, D.C. as lawmakers make the final decisions on the Economic Stimulus Package. It will be exciting to see the details unfold and the plan take shape as lawmakers work to quickly restore our ailing economy.

Locally, we're seeing some interesting trends. As we continue to work through our bank owned properties, it is a welcome sight to finally see banks responding to short sale offers. Couple that with the fact that with interest rates so low, buyers-especially first time home buyers and some investors-are finally beginning to feel the need to come off the fence and take action. The hardest hit markets are new construction and the upper end. Both are nearly at a stand still, though, as prices begin to stabilize and we finally weed through the bank owned properties (later this year), we should begin to see a domino effect that ultimately benefits all price ranges and housing types.

Now let's take a look at this week in real estate:

• East Bay-Castro Valley reports that this week we are hearing that banks are starting to take action to make their REO properties more attractive to buyers. Wachovia recently advised of a new program in which its REOs will be a better value for a comparable price. They state that their REOs will feature new paint, carpet and sod in order to offer buyers a better value. Fremont notes that buyer activity is slower this time of year and this is reflective of the inventory. REO sales are still brisk. Listings are steady and there is anticipation that the REO inventory will increase substantially in the next two months. Livermore notes that one of our pendings this week was a buyer controlled sale at $730,000 which is a big sale in this office. All of our other sales for the week were $135,000 to $376,000 which is pretty typical. REOs (primarily) and short sales remain the strength of sales in this market. We're still seeing struggles with REOs including complaints from Agents that listing Agents of REO properties are requiring the buyers to be prequalified through their lender and other offers are being accepted during the prequalification phase or presentations are being delayed (sometimes a week) to complete this process. Oakland reports a bit of a different story noting that Agents are writing offers-lots of them! We are busy, the office reports, and the buyers are out there. The hot price range seems to be $600,000 to $750,000. In our office, the hot listings are getting requests for 20-30 disclosure packages and multiple offers. Walnut Creek reports that it is experiencing a shortage of well-priced listings that are in good condition. REOs are popping up in more areas like Walnut Creek and Pleasant Hill. Inventory in East Contra Costa County, which is primarily REOs and short sales, is going fast.
• Monterey County-Listing activity and sales activity are relatively stable for the week. We are starting to see some higher priced properties selling in Carmel.
• North Bay-Open house activity was good even on Super Bowl Sunday according to our Southern Marin offices. Most open houses reported positive numbers, all with a good percentage of seemingly serious, though cautious, buyers. Once reported buyers coming back after taking a hiatus for some time and are back in the market thanks to lower prices and low interest rates. San Rafael notes that we are seeing many of our short sale offers get bank approved faster than we have seen in the past. Santa Rosa reports that buyer frustrations are growing with the REO market as mandatory second pre-approvals (often with lenders who don't return calls) and credits to buyers are given only when the favored lender is used. Sebastopol notes we had multiple offers in the $100,000 to $200,000 range. We had tons of people at open houses with one Agent reporting over 100 visitors to a short sale.
• Peninsula-Burlingame notes that there are so many buyers out there but so much indecision. The daily media spin of negative news makes it difficult for many of them to feel confident in making an offer. The smart ones and those with cash, however, are aggressively going forward. Many of the offers are low and sellers are often finding this reality difficult to accept. Woodside reports that we are beginning to see some movement in house sales thanks to attractive rates and the belief by some buyers that we may be at or near the bottom. Menlo Park El Camino notes that Agents are feeling some movement on the part of the buyers. Inventory in the very desirable areas is still in short supply. There are definitely some houses becoming available due to seller duress-not necessarily desperation but straining the family budget due to loss of job.
• San Francisco-The Market Street office reports that more offers were written in the past week than in the few weeks prior. Now let's get our buyers accepted and sellers ratified. A couple of our long-term listings were ratified this week at prices below the seller's expectation but the sellers are ready to move on. Cash buyers are out there and we are seeing them write on our listings. Lombard notes that most deals seem to be under $800,000 and using the $625,000 loan ceiling for fixed rates. There are a lot of price ranges in the higher end. The Noriega office reports that the market is showing new signs of life. January sales ended pretty well and city inventory remains low and steady. The Lakeside office reports that now that the Super Bowl is over, the stimulus package may get passed, there is a renewed interest in the real estate market which makes us all hopeful. Van Ness reports that suddenly buyers are coming back, especially in the range below $1.5 million. Better financing products would help greatly.
• Santa Cruz County-No information reported this week.
• Silicon Valley-Our Cupertino De Anza office is reporting lots of activity and very busy open houses-though neither is leading to many closed transactions. We're hoping now that we are passed the Super Bowl we will see a pick-up in activity. Los Altos First Street is reporting that buyers are coming to open houses but most are saying they are waiting for better prices. Los Gatos reports that pricing is key. Homes that are priced aggressively are selling-often with multiple offers. This is a good lesson for sellers to consider as they price their home competitively for the market. San Jose Main reports that the high end is very slow. We're starting to see more short sales in Almaden where before they were non existent. The Blossom Valley market has a lot more activity but 70% of it is distressed homes. Cambrian Park is slow at the moment because of its location and price point but it is almost the most stable market. San Jose Main reports that open house activity continues to be brisk but sales seem to be slow. Most activity seems to be in the $300,000 to $500,000 price range. Many buyers are still sitting on the fence right now.
• South County-Gilroy reports that inventory is down. We have not seen the surge that normally happens after the first of the year. Of course this is not a normal market. It appears sellers are not waiting to compete against the REOs and short sales. The Hollister office reports that REO properties are going through reduction process. REO listings are decreasing while short sale listings are on the rise. Morgan Hill notes that Agents are reporting good attendance at open houses. Short sales and REOs continue to dominate the market and make up the majority of our sales under $500,000.

My overall assessment of the market this week is that buyer interest is up though buyers do remain cautious. It seems buyers are finally realizing that with today's low interest rates and generous amount of inventory-including a large number of bank owned properties-they may be in a very strong position and in all likelihood, can afford a lot more home than they could've a year ago, or even six months ago for that matter. Having said that, they aren't necessarily jumping back into the market head first. They are being cautious and making smart decisions when they perceive a true value. This is an important lesson for sellers to consider as they prepare their home for sale. If you want your home to stand out in today's competitive environment, you need to price it well and show it well from the beginning so you gain the most interest.

Next week I will release my February Reality Check which will focus on interest rates and how they may affect a buyer's purchasing power. I trust this will be helpful in educating our clients on why now truly may be the best time to buy.

Until next week, make it a great one,

JOE BROWN